Banks in China plan to issue near near-record amounts of bonds in September to replenish their capital levels, in the wake of a first half profit plunge due to the impacts of the COVID-19 pandemic.
Sources said to Bloomberg that four Chinese banks, including the world’s biggest bank in terms of assets ICBC, will sell a total of 195 billion yuan (approx. USD$28.5 billion) in either perpetual or tier-2 capital bonds this month, for China’s highest monthly sales on record.
ICBC plans to issue 60 billion yuan in tier-2 bonds in September, while China Guangfa Bank is scheduled to issue 45 billion yuan of the instruments.
Bank of Communications has scheduled 30 billion yuan in perpetual bond sales, and Postal Savings Bank of China will sell 60 million yuan.
The moves arrive following a precipitous decline in profits for Chinese banks amidst efforts to combat the COVID-19 pandemic. In the first half of 2020 Chinese commercial banks posted net profits of one trillion yuan, for a YoY decline of 9.4%, according to data from the China Banking and Insurance Regulatory Commission (CBIRC).
In June Premier Li Keqiang called for Chinese banks to “sacrifice” 1.5 trillion yuan in profits in 2020, in order to improve financial inclusion and keep China’s economy on an even keel in the wake of the Novel Coronavirus.
A report released by S&P in August indicates that four of China’s big state-owned banks – Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Construction Bank (CCB) and Agricultural Bank of China) had a combined capital shortage of 2.25 trillion yuan (approx. $327.16 billion) in 2019.
S&P sees this figure rising to as high as 6.51 trillion yuan by 2024 due to the adverse economic impacts of the COVID-19 pandemic.
China Big Four State-owned Banks Headed for 6.51 Trillion Capital Shortfall by 2024: S&P Global Ratings
Eight Chinese Banks Issue Nearly 150 Billion Yuan in Perpetual Bonds Since Start of 2020